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GM may suffer future sales backlash from thousands of retirees

Many of the 118,000 salaried retirees are bitterly stating they will never buy another GM vehicle; and anyone who discounts the effects their numbers can have on sales should reconsider.

GM retirees have been loyal GM fans, often purchasing more than one car, not to mention convincing others in their family and friend networks to buy as well. Like the GM reitrement plan, though, those days may be over.

Call it what you will, but in recent emails both the General Motors Retiree Association (GMRA) and the National Retiree Legislative Network (NRLN) consider the ending of the GM retirement fund a definite breach in loyalty. No doubt it is a throwing under the bus; and if GM can do this to its own, then imagine what might happen to customers over time.

For sure, it’s not a great image message for GM. You might even justify the move by General Motors Company (NYSE: GM) as financially prudent. Nonetheless, this financial reengineering has still soured the attitudes of a majority of GM retirees who have been sending emails to the retiree organizations in a grass roots effort to even protest before the government. Reason is, this kind of financial re-engineering will also create more pension risks to the remaining pension plans by eliminating PBGC protections. It will also significantly reduce PBGC premium contributions from companies.

Fact is, Ford offered lump sum buyouts as well. However, Ford did not take the low road by palming the entire pension plan into an annuity-based entity like Prudential. Even Chrysler has stated that it has no intention of ending its pension plan for salaried retirees.

Of course, Prudential is not complaining, as they are being paid handsomely to take over. Perhaps that is why the monthly benefit is not easily matched by other life insurance companies, including Oxford Life and Security Benefits Corporation which sell indexed annuities with bonus growth and legacy preservation options. Problem is, while you wait a year or two to grow the amount toward an equivalent income, what are retirees supposed to draw from in the meantime? The only choice is savings or IRA; and that's supposed to supplement for the remainder of life.

Be apprised, only a life insurance company can guarantee an income in an annuity form; in this case, Prudential is a group annuity. However, many outside advisors like Mainstay Capital are chomping at the bit to get a hold of all those lump sum dollars to create bond ladders and portfolio mixes in an attempt to preserve legacy funds as well as growth.

According to the NRLN and the GMRA, General Motors is going to give Prudential $3.5 to $4.5 billion to replace its salaried retirees' pension plan with an annuity that will provide steady income, but not provide salaried retirees with the financial protection of ERISA and the PBGC if Prudential went belly up. For the record, on a solvency rating, Oxford Life and Security benefits are higher on the security chain, according to the Standard Analytical Service 2012 report.

Other Backlash

It is the auto sales backlash, though, that GM best be prepared to accept as a result. For the record, it is not only the active retirees that are affected by this move. Future retirees at GM will suffer the same fate of loss of protection. Furthermore, potential customers of GM are watching closely how they treat people.

Sure, one can look at it as an opportunity for retirees. However, the money sent to Prudential could have just as well paid into the pension fund, says the NLRN. Hard to disagree. So, do not think this is a free event even for GM. Earnings will take definite hit for the remainder of the year; and GM still owes the taxpayers which includes the retirees. No wonder the stock can't get kack to its IPO price.

More important, though, every pension that was not at risk is now definitely at risk; and greater risk will have to be taken in the market just to match the Prudential numbers, if the lump sum is taken by those who received a lesser amount.

In my view, it is that kind of corporate character that the public watches. My own book, “Perfecting Corporate Character” authored as far back as 1999, is filled with examples of such plans, manipulations and corporate deck-chair maneuvering by corprate executives.

Bottom line is, GM will lose many future sales from retirees as a result. See, when times got tough, those retirees and employees were always a source of sales which GM, even after killing its bond holders in bankruptcy, could count on. Better believe that will now be curtailed - big time.


Anonymous (not verified)    June 22, 2012 - 12:50PM

Thank you so much for portraying my thoughts exactly.
It boggles my mind that GM did not see this coming or choose to ignore these repercussions. What were they thinking or NOT! To me it is as clear as the nose on my face as to what the outcome of this action. GM does not understand human
nature, taking away a man's financial stability or put it at future risk is not going to make that person run out and buy their products; Loyalty returns loyalty.
It makes me very angry to see such an un-calculated move by a company that I respected for many years.
Loyal GM retiree, at least until I see what develops.

John Goreham    June 22, 2012 - 1:34PM

Union members do switch brands. My dad was a lifelong union member in the aircraft and turbine industry. GM angered him in the '70s with product failures. After only driving Chevy products for decades he switched to Toyota and Honda and has owned about 9 of them since then. GM's union guys have one thing that is unusual. After GM crashed and burned our government gave them part of the company.

Suthy (not verified)    June 22, 2012 - 4:34PM

Meanwhile, the rest of America has already been screwed out of our retirement. Welcome to the club, GM retirees. May Government Motors die a slow, painful death.

Anonymous (not verified)    June 22, 2012 - 11:29PM

don't forget about all the taxpayers they're stabbing in the back for billions while they're enjoying their taxfree profits.

Anonymous (not verified)    June 23, 2012 - 12:10PM

Another bullshit story written by someone sitting behind a desk who thinks life is not fair and has to vent his hatred at someone or something.

This deal with GM and it's retirees could be a good thing! Before condemning it, wait and find out the finer details.

Anonymous (not verified)    June 23, 2012 - 12:35PM

In reply to by Anonymous (not verified)

If this was affecting you, you would have a completely different opinion.
That is what is wrong with this country these days; everybody is just for themselves and don't care what actions affect others that worked hard all their life.
You should take a look in the mirror buddy.
The guy that wrote this article is stating what is happening to over 100,000 people that promises were made to for over 30 years of their career, I'm sure that you don't care because it in not affecting you. you you you .

Frank Sherosky    June 24, 2012 - 11:50PM

In reply to by Anonymous (not verified)

Thank you. Better written by you than me. Yes, other American can and will be affected by this action, as it WILL catch on and spread.

And a note to the first Anonymous - I do have the details; far more than you realize.

I have to admit, it's hard determining one Anonymous from another, except by the flair of the comment itself.

Dennis (not verified)    June 23, 2012 - 10:25PM

Dear Editor:

Can you please set up some type of opinion pole on this topic:
"GM may suffer future sales backlash from thousands of retirees"

Will you continue to purchase and/or lease GM products in North America if the Salary Retirees are forced out of their GM Salary Pension Plan?



Dennis (not verified)    June 23, 2012 - 11:26PM

The Canadian Salaried Retirees have not been asked to participate in a buyout program.

Anonymous (not verified)    June 25, 2012 - 5:02PM

I remember someone saying busch might be a good thing dont knock him just wait and see what happens and this is what happened to me gas,food,electric and water bills tripled and work dropped from 40+hrs a week to 24hrs most weeks less on others and all so corperations could make more profits. [proof] $76.00 a barrel for oil before busch gas was $1.65 a gallon now $3.15 a gallon and with ethanol added its partly watered down profits goverment motors is looking to make as much tax free profits as they can and they don't care about the little guys that got them were they are or the tax payers.

Jasper (not verified)    June 27, 2012 - 12:21PM

To the retirees bad feelings add current:
SAAB owners
Pontiac owmers
Oldsmobile owners
Hummer Owners
Saturn Owners

People who own and have owned these brands are not rich peoeple.
For GM to orpahn them is really poor .
Just compare that to what Ford did with VOLVO which is thriving.
I rather buy Korean, Japanese, Chisese. Outer Mogolian cars than GM crap.

Anonymous (not verified)    July 2, 2012 - 7:07PM

it's been 110'f here this weekend and on my monday morning 40 mile commute to work the side of the interstate looked like a gm parking lot 1 every 2 miles or so and most looked fairly new [ to bad all that bailout money went to a supercharged vette and camaro] oh and one 90's model dodge would've made a awsome ford commercial just saying people might be better off driving something they dont have to pay to build and then pay for to own that ends up broken down .

Anonymous (not verified)    July 14, 2012 - 11:59AM

In reply to by Anonymous (not verified)

That's BS! I don't believe a word of what you just wrote. You are just another jealous jerk who hates people who work for a living! I drive 200 miles a day round trip to work. Five days a week. In Alabama. What do I see on the side of the road? Toyotas and VW's. Sure there is the occasional domestic car, but no more than the imports. Keep supporting the foreign economies.

Carl G. (not verified)    July 14, 2012 - 2:52PM

I,m not a salaried GM employee but a hourly union employee and have two years too retirement. Ive already made up my mind that I have purchased my last GM product which was done in '06. Ive been loyal the the one who butters my bread, but they no longer butter it the right way. I think I see another auto brand in my driveway in the future. I wish, I could say good luck GM but they don't care about me or their employs; so I find myself not caring about GM's future. So who is the selfish one here? Me? or GM.

bingo (not verified)    July 20, 2012 - 6:38PM

In reply to by Carl G. (not verified)

You couldn't convince me GM was bad until a year ago, Lost all stock. Thank you Obama. Pay towards insurance, dental and lost cola. Half of retirement goes out in medical. And keep paying those tier two people low wages. They go to work not knowing if they will have a job down the road much less work side by side doing the same job as another making 3 times as much money. There is no way they can afford a home much less a new car. And this is Obama running his first company on the sidelines. If they go under, I will get state insurance (excellent) and food stamps, plus and what ever programs they decide to create to get elected. They never cancel a program so no worries but I will have more money. Seriously I bought my last new car a year ago and if I had known they were going to take away retirees cola, I wouldn't have bought a GM vehicle. They could of paid cola seeing as how they don't pay any taxes but hey, he saved the auto industry.